Correlation Between Bunge and Nomad Foods
Can any of the company-specific risk be diversified away by investing in both Bunge and Nomad Foods at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bunge and Nomad Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bunge Limited and Nomad Foods, you can compare the effects of market volatilities on Bunge and Nomad Foods and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bunge with a short position of Nomad Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bunge and Nomad Foods.
Diversification Opportunities for Bunge and Nomad Foods
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bunge and Nomad is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods and Bunge is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bunge Limited are associated (or correlated) with Nomad Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomad Foods has no effect on the direction of Bunge i.e., Bunge and Nomad Foods go up and down completely randomly.
Pair Corralation between Bunge and Nomad Foods
Allowing for the 90-day total investment horizon Bunge Limited is not expected to generate positive returns. Moreover, Bunge is 1.02 times more volatile than Nomad Foods. It trades away all of its potential returns to assume current level of volatility. Nomad Foods is currently generating about 0.01 per unit of risk. If you would invest 1,695 in Nomad Foods on August 27, 2024 and sell it today you would earn a total of 82.00 from holding Nomad Foods or generate 4.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bunge Limited vs. Nomad Foods
Performance |
| Timeline |
| Bunge Limited |
| Nomad Foods |
Bunge and Nomad Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bunge and Nomad Foods
The main advantage of trading using opposite Bunge and Nomad Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge position performs unexpectedly, Nomad Foods can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Nomad Foods will offset losses from the drop in Nomad Foods' long position.The idea behind Bunge Limited and Nomad Foods pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Nomad Foods vs. Lancaster Colony | Nomad Foods vs. Treehouse Foods | Nomad Foods vs. John B Sanfilippo | Nomad Foods vs. Seneca Foods Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |